How Crane bank closure sparked off BoU woes

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Crane Bank

By Kagenyi Lukka

The committee on commissions, statutory authorities and state enterprises (Cosase) wound-up its hearings regarding the closure and sale of defunct banks.

At the end of the hearings, the incompetence, impunity and criminality exuded by some BoU top managers was remarkably disquieting.

At this alarming rate, one has to continue to worry about the character of people that are entrusted with such sensitive public offices.

Before this probe started, word on the grapevine had it that Justine Bagyenda, Louis Kasekende  and Katimbo Mugwanya were central actors in the inglorious  closure and sale of crane bank limited(cbl).

The Cosase probe dug deeper than an ordinary customer of cbl would have known because of the high levels of concealment that the team at BoU acted with!

While seven banks had been irregularly closed by BoU with least shame, one elephant in the room (crane bank) helped to expose the impunity that BoU deployed in the closure of this bank.

So, how did crane bank’s irregular closure and sale spark off troubles at BoU?

We should note that it is not until the closure and sale of cbl that the special audit of the process of sale of defunct commercial banks was ordered by parliament.

Cbl’s closure and sale demystified the misguided BoU’s fallacious claim of independence. Under the cover of being independent, managers of the Bank of Uganda (BoU) had always acted as the most powerful and very competent.

This had been so because any one who attempted to question their dirty and villainous activities was thwarted by evoking Article 162 of the constitution.

Article 162(2) states that, ‘In performing its functions, the Bank of Uganda shall conform to this Constitution but shall not be subject to the direction or control of any person or authority’.

However, the same managers would not refer to the subsequent provision in 162(3) which states that, ‘Subject to the provisions of this Constitution, Parliament may make laws prescribing and regulating the functions of the Bank of Uganda’.

So, how can parliament make laws regulating functions of BoU that it has no control over as its managers wanted the public to believe?

Therefore parliament’s resolve to unmask the rot at BoU has clearly closed its misguided claims of independence. Must BoU be left to act in blatant disregard of the law even under the claim of independence? Parliament has answered this with a big No!

It revealed BoU’s ill intention and motive to destroy crane bank, not to save it. Apparently, crane bank only needed only Uganda shillings 157 billion to stay afloat but Bank of Uganda unexplainably injected in Ugx 478 billion and only sold it at Ugx 200 billion.

This was admitted by Mr. Benedict Ssekabira, the Director Financial Markets Coordination who insisted that at the time of closure, cbl only needed Ugx 157 billion to return to adequate recapitalization. Why then would BoU use Ugx 478 billion to clear the mess and later sell it in hurry?

Coupled with the above, is the fact that BoU took over statutory management of CBL on October 20, 2016. It then, on November 30, 2016, entered an agreement with DFCU Bank to buy CBL’s assets and liabilities.

This was before any valuation was done and thus, an agreement was entered without a catalogue/list of what was to be bought.

It should be recalled that whereas the agreement was entered into in November 2016, the first draft forensic audit report by PricewaterhouseCoopers (PWC) on CBL came out on January 13, 2017.How could BoU sell the unknown?

Cbl closure revealed that Katimbo Mugwanya was just a cover-up while Justine Bagyenda and Kasekende took the lead role. This cannot be gainsaid. Katimbo Mugwanya, who was the figure head statutory manager of cbl testified before parliament that he learnt of the sale of cbl through WhatsApp while he was at his farm. What more can one ask of such a person?

The executive director supervision then, Justine Bagyenda’s meddlesome hand in the destruction of cbl can be traced from the correspondences between her and the handpicked buyers.

Her reprehensible letter to dfcu to secretly the bad book and report it off the balance sheet showed her dirty footprints.

Despite usurping the role of the BoU’s legal department by hiring conflicted lawyers of MMAKS and AF Mpanga advocates, she continued dealing with them without minutes of meetings and terms of reference.

Dr Louis Kasekende’s meddlesome hand in the mutilation of cbl can be identified with his effortless attempts to block the special audit by the off the office of the auditor general under the fallacious claim of subjudice.

That said, he unlawfully authorized the injection of ugx 478 billion into the defunct crane bank contrary to the BoU Act, section 15(1) which requires such to be done in consultation with the minister of finance.

Under Kasekende’s watch, a sum of UgX270 billion out of the ugx 478 billion injected in cbl as liquidity support can’t be traced according to the auditor general’s special audit report on defunct commercial banks.

Furthermore, cbl’s closure helped to expose the conflict of interest and possible collusion by transaction lawyers of MMAKS and AF Mpanga who despite being conflicted, went ahead to claim to have done work without any documentation.

Finally, Crane bank helped to awaken proprietors of other defunct commercial banks to demand for accountability for the arbitrary closure and sale of their banks.

These include; National Bank of Commerce (NBC), Greenland bank (1999),Global Trust Bank (2014), The co-operative bank (1999) and International Credit bank Limited (1998).

Lukka.kagenyi@gmail.com

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